The Crackdown on FOBTs – Will It Impact Online?

Posted by Harry Kane on Wednesday, February 28, 2018

Every so often, government bodies are placed under increased pressure to crackdown on a particular activity or marketplace. This was evident in the notorious payday loan market back in 2017, when consumer advocated called for a widespread crackdown on irresponsible lending and ultimately compelled regulators to cap the interest rate applied by firms.

Few will argue that this has benefited consumers, of course, but wider questions remain about the right of government bodies to interfere in private sector matters (particularly in instances when no laws or items of legislation have been breached).

The gambling industry in the UK is the latest to deal with such complex issues, as both on and offline channels come under increased scrutiny from regulators and consumer watchdogs.

In this post, we’ll focus on the proposed clampdown that is set to hit the use of Fixed-odds Betting Terminals (FOBTs) in the UK, and ask how this will impact on operators and the online sector of the market.

FOBTs – What Are They and What Is the Story so Far?

In simple terms, FOBTs are electronic slot machines, which are typically found in betting shops throughout the UK. They offer access to an array of games and wagers, while machines currently operate with a maximum stake threshold of £100. This means that users can wager up to £300 per minute in a largely unregulated environment through FOBTs, and it is this that has prompted the government to propose a significant crackdown.

Labelled as “the crack cocaine of gambling” by the Department for Digital, Culture Media and Sport (DCMS), FOBTs have been received scathing reviews in the press and simultaneously undergone an in-depth review in Parliament. This has been underpinned by a clear desire to cap the maximum betting threshold associated with the channel, with the initial reports in October of last year suggesting that the individual betting limit would be cut to somewhere between £50 and £2.

With the initial assertion that the current thresholds are inappropriate and increasingly at odds with the UK Gambling Commission’s focus on driving responsible gambling practices, there’s no doubt that the current threshold of £100 will be reduced significantly when the final findings are unveiled.

This has already prompted a warning from major bookmakers that shops would be forced to close and jobs would be lost if the maximum stake is slashed, with the damage to the industry and the UK economy dependent on the final limit that regulators and the Uk government choose to impose.

Then and Now – Why the Industry is Braced for the Worst

The intervention of bookmakers initiated a period of calm before the storm, with most experts expecting some form of compromise when the result of the review were announced. More specifically, the introduction of a new maximum stake limit of around £50 seemed to be the most likely course of action, creating an area of middle ground that both regulators and bookmakers could share with relative comfort.

The tone has changed during the first weeks of 2018, however, as campaigners have ramped up the pressure on government bodies to take decisive action. The leading claim is that bookmakers are deliberately and strategically targeting vulnerable gamblers in the UK, by creating a gaming channel that enables users to place £100 wagers every 20 seconds.

This is denied vehemently by bookmakers, but the efforts of campaigners certainly seem to have reinforced the stance of the DCMS. Given this and the recent statements from culture secretary Matthew Hancock, it now seems as though the government will soon announced that the maximum betting threshold on FOBTs will be slashed to just £2.

Officially, of course, the government have consulted on a number of alternate proposals in a bid to make an informed decision, and although no formal announcement has yet been delivered it’s increasingly likely that the most drastic course of action will be pursued.

What Will Happen Next?

If the stake limit on FOBTs is cut to just £2, the bookmaking industry will go into overdrive in an attempt to reverse or alter this decision. After the proposed changes are formally announced, a 12-week consultation period will begin in earnest, and this will allow opportunities for bookmaker brands to lobby the government in an attempt to influence the final decision (which will subsequently be taken in May).

It was already thought that bookmakers would lobby for a threshold cap of £50 during this period, but they will now most likely do so with renewed vigour as they look to safeguard the future of the sector and the gambling industry as a whole. Legal challenges could also follow the announcement, so this is definitely a space to watch in the near-term.

When defending their position, bookmakers will surely rely heavily on the financial impact of an aggressive betting cap. After all, offline betting activity continues to account for 67% of the overall gambling industry, despite the rising influence of online channels during the last decade. According to the latest statistics from the UK Gambling Commission, bookmakers also reported an FOBT spend of £1.7 billion in the year ending September 2015, and this in turn accounted for a staggering 56% of all betting shop profits during this time.

In the event of a £2 cap, estimated figures suggest that up to 9,000 UK betting shops would subsequently become unprofitable, before ultimately facing the risk of closure by the end of 2020. This would cost countless jobs throughout the UK, while also potentially driving smaller and independent chains out of business.

The Last Word

There’s no doubt that this could have a devastating impact on offline gambling in the UK, while it may also be indicative of threats to the online marketplace in 2018.

After all, the crackdown on FOBTs is part of a wider attempt to impose greater regulations and restrictions throughout the gambling market as a whole, while online casinos and social gaming channels have already been targeted for allegedly questionable advertising practices and targeting vulnerable gamblers.

With this in mind, online casinos will continue to come under greater scrutiny in 2018 and beyond, particularly as the UK Gambling Commission continues to make a commitment to responsible gambling.